Today we will take a look at what a default notice is. A default notice is sent when the relationship with your creditor has broken down.
You are normally served a notice of default after three to six months of continuous missed payments on an account. The default notice is required by law as it forms part of the processes a creditor must go through before either pursuing legal action or passing on your account to an external debt collection agency.
The actual default notice itself is not a notice of legal action but is the precursor to any future action taking place.
The above applies to agreements you hold that are regulated by the Consumer Credit Act 1974.
What should you do if you receive a notice of default?
The most important thing is that you don’t ignore it. Ignoring the matter will only make things worse. The default notice will clearly set out what you must do and by when in order to remedy the breach.
If you are not in a position to do what is asked of you then you should consider getting advice. You could do this by approaching the original creditor and asking them about a possible repayment plan to catch up on the arrears. Another option would be talking to an organisation that provides debt advice such as StepChange Debt Charity or Payplan. This is especially true if you are struggling with multiple debts and are unsure where to turn to.
You could also visit your local Citizens Advice Bureau and seek advice on what would be the most sensible course of action for yourself. The most important thing is that you take action sooner rather than later.
What Information does a Default Notice Contain?
There are certain types of information that a default notice should contain. These are listed below.
1. The Creditors full name and address along with your own full name and address.
2. The type of agreement you have along with details of how the agreement has been broken.
3. The cost for early settlement (applies to fixed sum only).
4. What you need to do to resolve the issue.
5. What will happen if you are unable to rectify the situation.
What effect does a default have on your credit file?
Having a default registered against you on your credit report will severely affect your credit rating and greatly reduce your ability to obtain credit in the future.
If you have recently failed a credit check and have defaults then this is most likely the reason why. All you can do in that case is to work towards rebuilding your credit again and learning from any past mistakes.
Another useful piece of information, a default will not be reported on your credit report six years after the date it was registered. If you repay the default in full then it will be marked as satisfied.